Assignment and novation in construction and engineering projects

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It is important to understand the difference between assignment and novation when engaging in construction and engineering projects.

There are significant legal distinctions between the two, with serious consequences for all parties involved if they are not handled properly.

Novation is the legal name given to the process whereby both the benefit and the burden of a contract are transferred from one party to another. For example, a contract that has been entered into between an employer (A) and a contractor (B) is novated to a third party (C), which has the effect that C ‘takes over’ the obligations of A — and A ‘falls away’ such that it has no further obligations under the contract…

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